Mutual funds cannot invest in STDs of a bank that has invested in the scheme: Sebi

Sebi has been tightening the noose on mutual funds in recent times.

ETMarkets.com|

Aug 16, 2019, 07.16 PM IST

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Mumbai: The Securities and Exchange Board of India (Sebi) on Friday said that mutual funds will have to ensure that no funds of a scheme is parked in short-term deposits (STD) of a bank which has invested in that scheme.

They shall also ensure that the bank in which a scheme has STD do not invest in the said scheme until the scheme has STD with such bank, the markets regulator added.

It had that said for funds investing in debt and money market instruments, the process of amortisation-based valuation would be dispensed with completely and it will be counted on a marked-to-market basis.

Sebi had pointed out that in light of a few credit events in the fixed income market that led to an increase in liquidity risk of mutual funds, a need was felt to review the regulatory framework and take necessary steps to safeguard the interests of investors and maintain the orderliness and robustness of mutual funds.

It had also said that liquid and overnight schemes will not be permitted to invest in short term deposits, debt and money market instruments having structured obligations or credit enhancements.